Lalchand Tikamdas Makhija and another vs J K Kuriyan, Commissioner of Income Tax and others

T.D. Sugla, J.—This is case of a trust. The beneficiaries are three minors. The trustees are carrying on business the income from which is equally distributed amongst the minors in accordance with the terms of the deed of trust. The departmental authorities, applying the Supreme Court decision in the case of N.V. Shanmugam and Co. Vs. The Commissioner of Income Tax, Madras, , held that the assessment was required to be made in the hands of the trustees as a body of individuals, a unit separate and independent from the beneficiaries. This has been challenged by the petitioners under article 226 of the Constitution of India.

Shri Bhujle, learned counsel for the petitioners, submits that, by judgment dated July 24, 1990, a Division Bench of this court, to which I was a party, in Income Tax Application No. 202 of 1988 Commissioner of Income Tax Vs. Marsons Beneficiary Trust, Kothari Family Trust, Ramdayal Shivnarayan Attal Family Trust, Rajsons, Trustees of Anilkumar Trust and S.K. Shah Family Trust, , held that, in a case where the shares of the beneficiaries were known or determinate, the fact that the trust was carrying on business was no material and the assessment had to be made in like manner and to the same extent as it would have been made on the beneficiaries separately. Dr. Balasubramanian, for the Department, on the other hand, submits that the said case is distinguishable inasmuch as, unlike that case, in the present case, all the three beneficiaries are minors.

In my judgment, the distinction drawn by Dr. Balasubramanian is without any substance. If at all, this fact goes against the Department inasmuch as, in the case of minors, the question of their consent to the trustees carrying on the business would not arise. Following the judgment, Commissioner of Income Tax Vs. Marsons Beneficiary Trust, Kothari Family Trust, Ramdayal Shivnarayan Attal Family Trust, Rajsons, Trustees of Anilkumar Trust and S.K. Shah Family Trust, , I hold that the assessment of the income of the trust in the status of a body of individuals was not justified. The assessment may be made in the hands of the beneficiaries or in the hands of the trustees but it has to be in the same manner and to the same extent as it would have been made in the hands of the beneficiaries. In the above view of the matter, the rule is made absolute in terms of prayer clauses (a) and (b). No order as to costs.